The Securities and Exchange Board of India (Sebi) has announced a voluntary retirement scheme (VRS) for its employees, which is seen as part of a larger restructuring exercise by the stock market regulator.
The scheme, announced last week, will be open for two months beginning April 1, 2012 and cover full-time employees, who have completed at least 15 years of full-time service or attained 40 years of age. A significant number of senior officials are from public sector banks, from where the regulator originally sourced its human resources in the initial years. The scheme could be attractive for some of them, people familiar with the development said.
The regulator has set aside Rs 20 crore in its budget for 2012-13 under the head “Contribution to Staff Medical Assistance Fund and provision for VRS Payments”. A Sebi spokesperson declined comment.
The scheme is part of Sebi Chairman U K Sinha’s efforts to modernise the organisation and bring in new resources with skills required to meet the challenges of keeping a watch on and responding to dynamic financial markets, according to people familiar with the development.
The VRS was cleared at the first board meeting chaired by Sinha on July 28, 2011. The agenda papers of this board meeting had said, “The market has undergone a sea change and priorities for Sebi have changed. In order to discharge its responsibilities efficiently in the emerging environment, Sebi needs not only a hospitable legal and regulatory framework, but also a robust set of internal capabilities. It is, therefore, proposed to revisit the structural and organisational issues, re-prioritise areas of focus and look at the technological and manpower needs with emphasis on attracting and retaining good quality talent.”
Officials opting for the scheme will be eligible for an ex-gratia payment. According to the Sebi formula, the ex- gratia amount will be “equal to “pay plus dearness allowance” for the number of years of actual service rendered at 60 days for each completed year of service or part thereof in excess of six months or for the remaining months of service reckoned up to the date on which the employee would retire on superannuation.”
A Sebi official said the terms may not be attractive because of the tax treatment of ex-gratia payment. According to the Sebi circular on the issue, income tax will be deducted at source on the amount payable as ex-gratia. And since income tax will be deducted at source, the move will not be a VRS in the true sense of the word as recruitment can be made against the vacancy created - tax rules impose a restriction on recruitment where tax is not deducted.
Employees who are granted retirement under the scheme, however, will be eligible for retirement benefits like gratuity and provident fund contribution, among others, as extended for normal retirees.
The move from the market regulator comes despite an optional VRS scheme launched by the Reserve Bank of India (RBI) failed to yield desired results in 2003-04.
According to central banking sources, RBI’s VRS in 2003-04 and 2005-06 had left the organisation badly crippled in terms of staff strength, with a large number of officers quitting while staffers whom the apex bank wanted to go, hardly responded.
As on March 31, 2011, Sebi had a total of 583 employees in various grades - 469 officers and 112 secretaries and other staff. Around 145 employees were promoted by Sebi during 2010-11 and pay scales were substantially revised, according to the regulator’s annual report. Though Sebi hires new officers every year, the last major restructuring in Sebi was conducted in 2003.
